MINUTES OF THE SENATE COMMITTEE ON FINANCE Sixty-eighth Session March 3, 1995 The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Friday, March 3, 1995, in Room 223 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator William J. Raggio, Chairman Senator Raymond D. Rawson, Vice Chairman Senator Lawrence E. Jacobsen Senator Bob Coffin Senator William R. O'Donnell Senator Bernice Mathews COMMITTEE MEMBERS ABSENT: Senator Dean A. Rhoads (Excused) STAFF MEMBERS PRESENT: Dan Miles, Fiscal Analyst Bob Guernsey, Principal Deputy Fiscal Analyst Brian M. Burke, Program Analyst Debbra J. King, Program Analyst Sue Parkhurst, Committee Secretary OTHERS PRESENT: Tom Anderes, Vice Chancellor, Finance and Administration, University and Community College System of Nevada Janet Johnson, Deputy Budget Administrator, Budget Division, Department of Administration Guy Shipler, Vice Chairman, Commission on Judicial Discipline Michael Griffin, District Court Judge, First Judicial District Court, State of Nevada Leonard I. Gang, General Counsel and Executive Director, Commission on Judicial Discipline Jere Schultz, Budget Analyst, Budget Division, Department of Administration David Thomas, Chairman, Committee on Deferred Compensation for State Employees Deb Erickson, Budget Analyst, Budget Division, Department of Administration DeeAnn Parsons, Chief, Nevada State Energy Office, Department of Business and Industry Rose McKinney-James, Director, Department of Business and Industry Carolyn Stockton, Director, Nevada Rural Housing Authority, Department of Business and Industry Jill Holland, Accountant, Nevada State Energy Office, Nevada Rural Housing Authority, Department of Business and Industry Gerald W. Allen, Acting Director, Nevada Indian Commission, Department of Human Resources Senator Raggio announced there were several bill draft requests (BDRs) to be introduced. Tom Anderes, Vice Chancellor, Finance and Administration, University and Community College System of Nevada (UCCSN), testified on a bill draft request (BDR 31-493) concerning the university system (see summary, page 2). Senator Raggio asked Mr. Anderes to explain how the public interest is served with the proposed legislation. Mr. Anderes said the request is intended to enhance the management of the University and Community College System of Nevada (UCCSN) at the institutional level in addressing funding requirements that span fiscal years. It is felt the ability to carry forward funds will provide a better match between institutional plans and budgets. Mr. Anderes pointed out many state agencies in Nevada and throughout the U.S. have a tendency near the end of the fiscal year to expend dollars at a higher rate so they have a relatively low reversion. While it is not a significant problem, he continued, the opportunity to carry forward some of the General Fund balances will probably result in better management of the funds. Mr. Anderes said many programs do not complete all of their business "in a fairly orderly fashion" by June 30, the last day of the fiscal year. What is being proposed with this measure is to be able carry forward what will probably be a very limited amount of General Fund dollars, "to be able to span into the next fiscal year, to do some things that have been justified from the prior year." Senator Rawson stated for the record his intention to abstain from participating in the discussion on this issue. BILL DRAFT REQUEST 31-493: Provides for retention of unencumbered balances of legislative appropriations made to University and Community College System of Nevada. SENATOR JACOBSEN MOVED TO INTRODUCE BDR 31-493. SENATOR COFFIN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RAWSON ABSTAINED. SENATOR RHOADS WAS ABSENT FOR THE VOTE.) Senator Raggio said BDR 31-493 would be introduced as a committee bill. He noted the mere fact the committee introduces a bill does not commit it to passage. Senator Raggio called on Janet Johnson, Deputy Budget Administrator, Department of Administration, to explain the administration's next two bill draft requests. * * * * * BILL DRAFT REQUEST 16-1743: Increases number of members of state board of parole commissioners. Ms. Johnson said this bill is being requested to cover the increased hearing activity that will be generated through the addition of the Lovelock correctional center. SENATOR RAWSON MOVED TO INTRODUCE BDR 16-1743. SENATOR COFFIN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RHOADS WAS ABSENT FOR THE VOTE.) Senator Raggio stated BDR 16-1743 will be introduced as a committee bill. * * * * * BILL DRAFT REQUEST 57-1758: Deletes provisions creating or relating to advocate for insurance customers. Ms. Johnson said the request for introduction of this bill is in support of the Governor's budget. She explained the insurance advocate position is being deleted as a result of increased fees that would otherwise be required to support the activities of that position. The advocate currently only conducts rate hearings. SENATOR RAWSON MOVED TO INTRODUCE BDR 57-1758. SENATOR O'DONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS COFFIN AND MATHEWS VOTED NO. SENATOR RHOADS WAS ABSENT FOR THE VOTE.) Senator Raggio stated this bill draft request will be introduced as a committee bill. Commission on Judicial Discipline - page 153 Guy Shipler, Vice Chairman, Commission on Judicial Discipline (CJD), indicated he was testifying in place of the chairman of the commission, Frank Brusa, who was unable to attend this hearing. He introduced District Judge Michael Griffin as a new member of the commission and Leonard Gang, the commission's general counsel. He deferred to Mr. Gang to present the agency's budget. Leonard I. Gang, General Counsel and Executive Director, Commission on Judicial Discipline, provided an update of the workings of the judicial discipline commission. He observed that many of the committee members had participated in the Interim Finance Committee hearings on the judicial discipline commission and were therefore fully aware of the circumstances that have given rise to the commission's hiring of counsel and establishment of an office. He reminded committee members the Nevada Supreme Court has ruled in a recent case the commission can no longer be represented by the Office of the Attorney General in the performance of duties related to judicial discipline; the court has "urged the Legislature" and informed the commission it must engage counsel and have a separate investigative staff in the attorney general's office. Mr. Gang was subsequently engaged as counsel for the commission. Mr. Gang further reminded the committee the Interim Finance Committee (IFC) granted the commission the sum of $217,000 to continue its work. Since that time the commission has hired a full-time legal assistant, moved into new offices at 1050 E. Williams in Carson City, furnished the offices and secured equipment, such as computers, and the office is now operational and functioning. The commissioners have held two meetings during which they handled a significant number of cases that were backlogged as a result of the ongoing litigation, Mr. Gang stated. Mr. Gang noted the court has recently handed down an additional decision, referred to in the media as "Whitehead 4.5," which outlines in some detail the rules applicable to the commission and the manner in which the court expects the commission to function. This decision enables the commission to proceed with the Whitehead case if it so chooses, he said. Mr. Gang said the commission engages investigative staff on an ad hoc basis. He directed the committee's attention to the Supplemental Work Program Narrative (Exhibit C) the commission had prepared for the committee and for inclusion in the record. Noting the original budget proposal was submitted in August 1994, prior to the IFC meeting, Mr. Gang said the work program narrative brings the commission's budget proposal up to date. He further stated the budget being requested mirrors the budget contained on page 155 of the Executive Budget. Senator Raggio requested that the commission indicate in detail its current and projected work load and needs. He said the Legislature's intent would be to fund the commission to the extent necessary to perform its constitutional duties without overfunding the agency on the basis of the Whitehead case. Mr. Gang referred the committee to the performance indicator statistics on page 14, Exhibit C, which provide an indication of the complaints that have been considered by the commission and those that are pending as of January 1, 1995. Presently pending are six complaints carried over from the last meeting and now under consideration, 27 cases under investigation and 21 cases tabled until the next meeting of the commission. The charts on page 15 of the work program narrative indicate the numerical and percentage increase in the work load of the commission. Mr. Gang pointed out the work load of the commission increased 74 percent in 1994 over the 1992 level. Mr. Gang said the people of the State of Nevada in November 1994 overwhelmingly passed an amendment to article 6, section 21 of the Nevada Constitution (which authorizes the commission) to expand the jurisdiction of the commission in several significant aspects. It has provided the commission now has jurisdiction to censure and impose other forms of discipline on justices of the peace and magistrates which it previously lacked, Mr. Gang continued. It has also expanded the jurisdiction of the commission in that the commission can now impose other forms of discipline upon other judges. Mr. Gang said it is anticipated these expansions will give rise to a significant number of instances in which the commission will be able to exercise its jurisdiction. There is definitely an increased work load, he stated. Mr. Gang said the work load of the commission and the work load of counsel and staff are significantly different from what they were in the past. The chief deputy attorney general who formerly represented the commission has indicated to Mr. Gang that whereas her work load relative to the commission had been limited to performing a minimum of services specifically requested by the commission, the work load of counsel at this point is significantly different in that counsel reviews and prepares for the commission an analysis of each complaint brought to the commission's attention. Both factual analysis and legal research are necessary so the commission will be prepared to rule on the cases that come before it. Mr. Gang said he also supervises and directs any investigations that need to occur and that can occur as indicated in the supreme court decisions. He reiterated the manner in which the commission functions is significantly different from what it was, and he assured the committee that with the present work load his job is full-time and the commission is exceedingly busy. Senator Raggio said the question arises regarding work load and staffing needs because previously, even with the Whitehead matter involved, the attorney general's staff for commission-related work consisted of 2.8 positions. He further stated that while the supreme court decision has precluded the attorney general's office from acting as counsel to the commission, and therefore staffing is necessitated, the question persists as to the need for all the staff authorized by the Interim Finance Committee as an interim action. He indicated the need to justify continuing the authorized staffing and asked what the proposed budget contemplates in overall staffing and contractual services for the biennium. Mr. Gang replied the budget contemplates a staff of two persons, himself as general counsel and his legal assistant. He has terminated the part-time administrative position since the work of that position is being now handled by himself and the legal assistant, thereby reducing staff by a half position. In terms of additional staff, Mr. Gang continued, the Interim Finance Committee anticipated the commission would hire a person to perform full-time investigative services. He said the request in the proposed budget, however, is to allow contracting for these services, which should be less expensive. Mr. Gang said he has requested the same amount of funds approved by the Interim Finance Committee for the investigative position because it will give him the flexibility to engage full-time investigative staff should the commission determine it would be less expensive to do so. He restated his expectation, having analyzed the situation over the past 4 months, there will be a cost savings with the proposal to contract for the investigative services. Mr. Gang said the supreme court has ruled that while the commission needs to engage counsel to represent it, the same counsel cannot represent the commission in terms of the presentation of probable cause hearings or informal hearings regarding judges. He has therefore included in the budget the sum of $50,000 to engage special counsel to perform those services. Referring to decision unit M-600, Legal Representation (page 154), Senator Raggio noted the recommendations for a Contract Investigator and a Contract Attorney/Prosecutor and inquired as to the recommended amount of funding for each position. Mr. Gang said the amount recommended for the contract attorney position is $50,000 for each year of the biennium and the amount for the contract investigator is $45,000 per year. He explained that at present he contracts with different investigators on an ad hoc basis, depending on where the investigation needs to be conducted; travel expenses are thereby saved, to the extent possible. In response to further questioning from Senator Raggio regarding the proposed contract attorney position, Mr. Gang said he would not anticipate hiring a single attorney to prosecute matters but would engage attorneys as needed, ad hoc. He explained there are significant reasons for engaging attorneys who do not practice in the jurisdiction wherein the complaint has arisen. Senator Raggio asked Mr. Gang to explain at what point the need for the Contract Attorney/Prosecutor comes into play and if it is after the probable cause determination. Mr. Gang replied the issue had been open and unresolved until the recently rendered decision of the supreme court indicated the commission can engage counsel to present probable cause hearings. Once the proceedings reach the point of requiring a probable cause hearing, counsel can be engaged. It would be anticipated the same counsel would also handle the formal hearings if they are necessary, Mr. Gang stated. In clarification of the foregoing point, Mr. Gang offered an explanation of the procedure that would be involved under the new decision of the Nevada Supreme Court. He told the committee that when the commission receives a complaint it is reviewed by the commissioners to determine whether to dismiss the complaint or to perform an investigation. If an investigation is to be performed it would be Mr. Gang's responsibility to supervise the investigation. Mr. Gang then would prepare another analysis regarding the investigation that was performed. At that point the commission would determine whether to proceed with a probable cause hearing. Should it elect to proceed with a probable cause hearing, the commission can at that point engage counsel to present the matter to the commission. Senator Raggio asked if Mr. Gang, as the commission's attorney, would be precluded by the new guidelines from presenting the matter to the commission in a probable cause hearing. Mr. Gang replied affirmatively and said having the commission's general counsel, rather than another attorney, present the matter to the commission in a probable cause hearing has been analogized by the court as having the prosecutor in the jury room. Senator Raggio stressed the committee's need to understand the situation regarding the manner in which complaints are handled. He further questioned Mr. Gang concerning to whom the complaints are directed and how they are handled. Mr. Gang said the complaint is directed to the Commission on Judicial Discipline. The initial review of the complaint is made by the general counsel's legal assistant to ensure it conforms to the requirements; it must be a sworn complaint. Senator Raggio explained he has not yet read the recent decision of the Nevada Supreme Court and therefore requires edification on the process involved under the new guidelines. Mr. Gang said after the complaint is reviewed and determined to be in proper form, he reviews it and prepares an analysis of it, both as to the factual matters presented and the legal issues raised, for presentation to the judicial discipline commission. The commission then considers the matter and determines whether to dismiss the complaint or to investigate the matter. Senator Raggio asked if all of these decisions are made by the full commission and if it is therefore necessary to have a meeting of the full commission on any and all complaints filed, even when a complaint is spurious on its face. Mr. Gang answered yes to both questions and explained the supreme court has said every complaint filed must be reviewed by the commission, which must then determine whether to dismiss the complaint or to proceed further with it. The commission reviews every complaint in the first instance to determine whether the matter should be investigated, within the confines that the supreme court has said it can be investigated by the commission. In further questioning Senator Raggio ascertained from Mr. Gang, based on his interpretation of the supreme court guidelines, there is no provision under the guidelines for someone such as Mr. Gang to review the complaint and dismiss it if, on its face, it is "completely ridiculous," and the commission must examine all complaints. Michael Griffin, District Judge, First Judicial Court District, affirmed this is the case. Senator Raggio asked Judge Griffin what percentage of the complaints disposed of by the commission fall within the category [of obviously doubtful merit]. Judge Griffin said some of the complaints about ethical violations have arguable merit. He said Mr. Gang is not currently in the position of being unable to review all of the complaints. While some of the complaints he has seen will clearly not result in further action, the judge continued, they must be examined because they "arguably state a possible ethical violation by the judge." Senator Raggio inquired if even with regard to patently absurd complaints the general counsel is required to provide an analysis and a recommendation. Mr. Gang replied yes. Mr. Shipler said it is "a brand new idea" that the commission must go to this extreme in handling complaints, and is an example of the tightening of the rules by the supreme court. Originally it was permitted by the commission to have the secretary who received the complaint dismiss it out of hand if it was obviously absurd, Mr. Shipler stated, but apparently this is no longer allowed. Senator Raggio asked if it is the case that if the commission determines there is some basis for the complaint it will be referred for investigation. Mr. Gang said this is correct. The contract investigator would be engaged at this point. In reply to Senator Raggio's query as to the general counsel's role in the investigation at this stage, if any, Mr. Gang said he would retain the investigator, contract with him, and outline the investigation (to identify what is to be investigated), within the confines of what the supreme court has said can be investigated. He said the supreme court has somewhat narrowly construed the investigation at that point in time, and any investigation performed must not exceed the limitations imposed by the court. Senator Raggio asked what the limitations imposed by the court consist of, as a practical matter. Mr. Gang said the supreme court phrased it as, "within the narrow confines of the complaint to ensure that the facts as stated in the complaint can be adequately presented." He noted that in his previous service as counsel to the state bar, one of the larger issues raised was the necessity for disciplinary agencies to have adequate investigative staff, since in many instances persons who file complaints may not be able to articulate the exact nature of their complaint and the applicable canons or rules. In gleaning through the complaints to determine those that may present merit, Mr. Gang continued, it is necessary to gain a full and detailed understanding of the complaint and the facts supporting it. The general counsel therefore secures the necessary documents, interviews the necessary witnesses, and obtains reports and witness statements for presentation to the commission. Senator Raggio inquired as to the confidentiality of the complaints during the investigation and prior to presentation to the commission. Mr. Gang said everything brought to the commission remains confidential up to the point a probable cause hearing is held and the commission determines it should proceed to a formal hearing. The senator asked what happens at that point. Mr. Gang answered that the special prosecutor (the contract attorney) engaged by the commission prepares a formal pleading which is filed with the commission; at that point the matter becomes public. In response to the senator's question as to who determines whether there is probable cause and whether this is done by the investigator or at a probable cause hearing, Mr. Gang said this would occur at a probable cause hearing before the commission. Senator Raggio asked the purpose of that hearing. Mr. Gang said the purpose is to determine whether, in the opinion of the commission, the issues raised and presented for consideration would give rise to the probability that clear and convincing evidence could be presented to the commission at a formal hearing (requiring judicial censure or other action). Senator Raggio inquired if the probable cause hearing is held before the full commission. Mr. Gang replied in the affirmative. Senator Raggio asked what occurs if the commission determines there is probable cause. Mr. Gang said the formal complaint is filed and a public trial is held, again before the commission. He affirmed the senator's assumption the same person determines probable cause, under the supreme court's guidelines, and also sits in the formal hearing on the complaint, and he said such a circumstance is not unusual in regard to judicial discipline throughout the U.S. He said the American Bar Association suggested at its meeting in August 1994 other methods for handling judicial discipline matters, including a two-tier system. In further questioning Senator Raggio asked Mr. Gang if he could represent to the committee at this time that the decision of the supreme court indicates it is appropriate for the commission to sit in both situations as presented above. Mr. Gang replied yes. The senator said his understanding is that at the probable cause hearing itself, the contract attorney presents the matter to the commission, both for probable cause purposes and ultimately in furtherance of the formal complaint at the formal hearing. Mr. Gang answered that such is the commission's expectation. He said it is expected the probable cause hearing would not be the same type of hearing that would occur at a formal hearing, but would be shorter with presentation of a limited amount of evidence. After the probable cause hearing, the contract attorney can perform an additional, broader investigation to discover witnesses and evidence that would be presented at the formal hearing. Senator Raggio asked at what point the accused jurist is notified of the processes involved in handling a complaint. Mr. Gang said the jurist would be notified after the commission has determined it should continue to a probable cause hearing, at which time the jurist would receive a copy of the complaint that has been filed and a copy of the statements of witnesses that are anticipated to be presented at the probable cause hearing. The jurist is required to answer at that point and may present witnesses and documents at the probable cause hearing. Senator Raggio questioned the fact the jurist is not notified initially, when the first complaint is received, and therefore has no opportunity to refute the complaint and provide input as to whether or not there is probable cause. Mr. Gang stated the jurist is not necessarily notified, under the procedure established; however, there are instances in which the jurist could be notified, and a statement requested from the jurist. Senator Raggio asked what the supreme court has said about this. Mr. Gang replied the court has not addressed this issue. The senator voiced the opinion it is unusual that the jurist would not be notified of a complaint and the opportunity given the person to submit information pertinent to a determination of probable cause. Mr. Gang noted that in a great many instances the complaint is dismissed after investigation, before proceeding to a probable cause hearing. Senator Raggio further questioned the fact the jurist is not notified and asked Judge Griffin to comment. Judge Griffin affirmed Mr. Gang's remarks but said if the complaint is investigated the jurist is almost always notified because he is told an investigation is in process. Traditionally the commission has not notified the jurist of a complaint deemed upon investigation to be without merit and subsequently dismissed. Senator Raggio suggested it would be appropriate in all cases to notify the jurist of a complaint pending against him or her if such notification has not been precluded by the supreme court's decision and its applicable guidelines. Judge Griffin responded the supreme court has indicated the confidentiality of the complainant must be maintained to protect the complainant against possible retaliation by a jurist against whom the complaint has been filed. The complaint is treated as if it has arguable merit until and unless it is determined otherwise, the judge indicated. Returning to discussion of the point at which the contract attorney would be retained by the commission, Senator Raggio asked if the attorney would be engaged on a case- by-case basis according to the necessity for the services provided by such an attorney. Mr. Gang said this is correct. The senator inquired as to how many probable cause hearings the commission can anticipate hearing annually as a result of the processes outlined in the preceding testimony. Mr. Gang indicated it is difficult to project but estimated the number of hearings at between eight and 10. Senator Raggio observed there was only one hearing in 1994. Mr. Gang said the commission was not able to perform its constitutional functions, in the view of the commissioners. The senator asked if it would therefore be difficult to speculate as to the number of full-blown hearings that might be held during a year. Mr. Gang said he could not provide the information at present, but has indicated to the staff of the budget office, which had requested such statistics in December 1994, that these kinds of statistics and performance indicators are now being kept and can be presented to the Legislature in the future. Noting the budget request for the contract attorney is $50,000 per year, Senator Raggio inquired as to the basis for the request in terms of the number of hours involved. (It was ascertained the attorney services would be contracted for on an hourly basis.) Mr. Shipler pointed out to the committee that the whole system of the judicial discipline commission has been very much formalized over what it had been, and much more detail along the lines discussed above is now required; that is the reason there are likely to be more such hearings, he stated. Mr. Gang said the $50,000 budgeted would cover 333 hours of attorney time at $150 per hour, but the commission attempts to contract for a lesser hourly rate when possible. Senator Raggio inquired of the budget office representatives if any balance from the previous appropriation (a reversion) for Fiscal Year (FY) 1995 is shown in the Governor's budget. It was ascertained any funds not spent would revert to the contingency fund. Calling the committee's attention to a letter submitted by Common Cause indicating support for the budget proposed for the Commission on Judicial Discipline, Senator Raggio said the letter (Exhibit D) would be entered into the record. Senator Jacobsen voiced doubts he has had about the ethics of those who serve in the justice system. He stated concern about the way in which the commission had reached its salary levels, and he asked what was used as a guideline for the general counsel's salary as well as what are the fringe benefits of the position. Judge Griffin replied he could not respond to the methodology used in determining salary or what the fringe benefits are but could explain the commission's decision to hire Mr. Gang. He said the supreme court's posture toward the commission was that the entity was in serious disarray, not necessarily by its own doings. He summarized his response to Senator Jacobsen by saying he doubted the commission could have found someone to handle the kind of difficulties the commission has been experiencing without securing someone of Mr. Gang's ability, and he viewed the salary Mr. Gang is receiving as fair compensation for his services. Senator Raggio asked the budget office for the information pertaining to salary and fringe benefits. Jere Schultz, Budget Analyst, Budget Division, Department of Administration, stated the fringe benefits for the general counsel are $17,409 for FY 1996 and $17,782 for FY 1997. The base salary is $106,667 for each year of the biennium. Acknowledging times have changed, Senator Jacobsen said years ago people in the judiciary system served "by honor and respect," but today it seems the basis for serving is the monetary value associated with holding positions of service. However, he expressed support for the Commission on Judiciary Discipline. Senator Raggio noted the situation has been mandated in the state constitution and is now a fact of life. Senator Coffin referenced a letter received by committee members earlier indicating the support of all five justices of the supreme court for the budget recommended by the Governor for the Commission on Judicial Discipline. He described the letter as unusual and as a step forward in that the court and the commission had been at tremendous odds. He said it appears the situation has stabilized, and while there may still be unsettled issues, the tenor in which the issues are being addressed has risen to a new level. Senator Coffin further commented the supreme court obviously has no quarrel with the Interim Finance Committee's approval of funds for the commission and believes the needs of the commission will be extraordinary for at least the next 2 years, hence its support of this budget. He noted his extensive familiarity with the issues involved, having participated in all of the debates of the IFC, and expressed the hope the commission will be allowed to function without hindrance. He voiced support for the salary being paid Mr. Gang, who he pointed out may be confronted by judges hostile to someone in his position. Senator Raggio requested staff obtain the letter from the supreme court referred to by Senator Coffin for inclusion in these minutes. The letter is attached hereto as Exhibit E. There was discussion on the cost of office space. It was ascertained the cost of funding the requested non-state owned office space rental is $1.15 per square foot. Mr. Gang said the office is located in the same building as several other state agencies. Senator Raggio inquired if the office is adequate for the commission's purposes, given the augmented staffing situation. Mr. Gang replied yes. Deferred Compensation - page 665 David Thomas, Chairman, Committee on Deferred Compensation for State Employees, presented this budget. For the benefit of the new committee members, Senator Raggio asked Mr. Thomas to explain the purpose of the Deferred Compensation Committee. Mr. Thomas said the committee was appointed by the Governor to oversee the administrative aspects of the State Employees Deferred Compensation Plan. The proposed budget provides for operational expenses associated with the plan. Funding for the operational expenses is derived from an assessment to each participating employee in the plan and there are no state funds involved, by statute, Mr. Thomas continued. The current assessment is $2 per employee per year. Drawing attention to the handouts he had provided the committee (Exhibit F), Mr. Thomas said the documents indicate the status of the deferred compensation plan. With reference to the number of active participants in the plan, Mr. Thomas said the current number is actually 4,700, approximately, rather than the 4,500 indicated in the letter from ITT Hartford (Exhibit F). Senator Raggio asked how much of an employee's salary can be contributed to the plan. Mr. Thomas said the maximum is 25 percent or $7,500. The senator noted the plan has grown substantially. Mr. Thomas said there is a total of approximately $85 million in the fund at present. Senator Raggio noted the ITT Hartford letter indicates a yield of 6.16 percent. Mr. Thomas said the yield was earned on the general account, where most of the funds are held. He referred to the Summary of Investment Option Accounts sheet in Exhibit F, listing each of the 18 funds available to investors in ITT Hartford as of December 31, 1994. He pointed out that $47 million of the $85 million in the fund as of that date was in the general account (Guaranteed Interest Account), which is the account yielding the 6.16 percent. Senator Raggio presented a question from the fiscal analysis staff regarding where the $2 administrative assessment, which for the 4,505 participants enrolled in the plan would have generated $9,010 in revenues in FY 1994, is recorded in the budget. Mr. Thomas replied the ITT Hartford firm collects the assessment annually and then remits it to an account maintained at the Bank of America. That account is drawn upon as expenses must be paid out of this budget and deposited into the state treasury as revenues. Mr. Thomas said he and the assistant chairman have signature authority on that account, which at present contains approximately $25,000 to $28,000. Mr. Thomas pointed out an enhancement request in the budget in decision unit E-150, Employee Treatment (page 666), for a half-time Management Assistant II to provide administrative assistance to the Deferred Compensation Committee as well as related in-state travel and operating costs. He said the day-to-day administration of the fund is assigned to the person chairing the committee. He noted the expenditure of state funds in connection with administering the plan is prohibited by statute (Nevada Revised Statutes (NRS) 287.370). However, he continued, no positions have ever been assigned to assist in the administration of the fund, and the committee's chairman has always assumed responsibility for it using the person's current staff to prepare agendas and minutes and to respond to participant questions regarding emergency withdrawals. Mr. Thomas said the Deferred Compensation Committee has estimated it is taking approximately one-half position to accomplish the necessary administrative support, which is the basis for the half-time position request in the budget. Senator Raggio inquired if an increase in the $2 assessment is required to fund the position. Mr. Thomas replied the assessment would be increased to $3.50. This has been approved by the Deferred Compensation Committee. pending budget approval of the requested position. Senator Raggio commended Mr. Thomas for his presentation. Energy Conservation - page 827 DeeAnn Parsons, Chief, Nevada State Energy Office, Department of Business and Industry (DBI), introduced Jill Holland, Accountant, Nevada State Energy Office (DBI), and Deb Erickson, Budget Analyst, Budget Division, Department of Administration, and then presented the budget for this agency. Ms. Parsons testified the budget for the state energy office is set up to accommodate the federal programs that provide the agency's funding. Currently the energy office receives no state funds and has so far this fiscal year generated $640,000 in federal funding for Nevada. The five state staff members are all in Carson City, Ms. Parsons continued. The energy office is concerned with the many facets of energy efficiency and conservation, renewable energy resources, alternative vehicle fuels, and regulations for the conservation of energy in residential and commercial buildings in Nevada. Ms. Parsons said NRS 523 defines the duties of the energy office, which includes the production of the "Energy for Nevada" report distributed to the committee members in January (on file in the Research Library). She further stated the agency administers federal programs that include the Institutional Conservation Program, which provides funding for schools, hospitals, energy audits and installation of energy- saving measures. Ms. Parsons pointed out that approximately $200,000 each year in project funding in this program is paid directly to the successful applicants by the U.S. Department of Energy (DOE) and is not part of the agency's budget. The only part received by the energy office is $50,000 for administering the program and managing the grants. Ms. Parsons said the agency's umbrella federal grant is the State Energy Conservation Program, which provides administrative support for a wide range of projects such as training workshops and conferences, teacher and classroom energy education, technical information and referral services, oversight of the building codes and serving as a catalyst to bring parties together to solve energy-related problems. The energy office has also developed a 5-year cooperative agreement with the Western Area Power Administration; this provides funding for projects in the southern Nevada service territory. Additionally, the agency applies for and administers special programs available through state energy offices. During the present biennium the energy office has been successful in securing $215,000 to assist with the alternative fuel program in Las Vegas, Ms. Parsons continued, and is currently working on other special grants. Senator Raggio inquired how the $215,000 in grant funds was used. Ms. Parsons said $140,000 was used to purchase alternative fueled street sweepers for the city. It has not been determined how the remaining $75,000 is to be spent. Ms. Parsons further testified that due to the importance of energy in Nevada, a legislative subcommittee on energy-related matters, Senate Concurrent Resolution 35 of the Sixty-seventh Session, worked throughout the year on this issue. The subcommittee's report, LCB Bulletin 95-7, contains several bills on energy, to be introduced in the current session. One of the bills is Senate Bill 179, which contains several major sections concerning the energy office and a $65,000 appropriation request for each year of the biennium to support energy office activities. SENATE CONCURRENT RESOLUTION 35 OF THE SIXTY-SEVENTH SESSION: Directs Legislative Commission to conduct interim study to review present efforts to conserve and develop energy resources in Nevada. SENATE BILL 179: Establishes state energy office and makes other changes relating to energy conservation. After ascertaining the $65,000 appropriation request is in addition to the budget and was recommended by the interim committee, Senator Raggio inquired as to how the requested appropriation would be used. Ms. Parsons said the funding is to maintain the ability of the energy office to provide small amounts of seed money to attract and leverage additional dollars for state projects and to secure the non-federal matching funds required for the federal programs. Historically, Ms. Parsons stated, the funding has been provided by the Petroleum Violation Escrow Account. She said the appropriation in the bill is "to support [the agency's] entire operation." Senator Raggio asked if the appropriation is necessary for the base budget operation. Ms. Parsons said it would not be necessary for a "very, very bare bones" budget. The energy office is concerned the state matching funds are disappearing and this will force the agency to cut back on many of its sub-grants, the means for accomplishing its projects. Senator Raggio asked if the energy office is losing all of the petroleum forfeiture funds. Ms. Parsons replied yes, except for a small amount of carryforward from the previous biennium. There are no new distributions expected, although it is possible this will occur in the future. Ms. Parsons pointed out a technical error in the budget under Resources on page 827. The line item Federal Funds inadvertently contains $100,000 each year of the biennium in funds from the lease of federal lands. The same income and the attendant expenditures are also reflected in the enhancement budget on page 829 (E-126, Accessible, Flexible Responsive Government, Resources). Senator Raggio recalled that these funds are only available if the collection exceeds $10 million. Ms. Parsons affirmed this. Senator Raggio said he has been informed by the fiscal analysis staff that about $7 million will be received, so it is therefore unlikely the energy office will receive the $100,000 indicated in the budget. Ms. Parsons agreed it is very unlikely. It was determined the amounts shown for the line item Federal Funds under Resources on page 827 of the base budget must be reduced to correct the technical error; additionally, on page 828 the line item Reserve must also be reduced by $100,000 in each year of the biennium, leaving the amount of $36,664 in Reserve in FY 1997. Senator Raggio said one of the bills heard in the Senate Committee on Government Affairs, if approved, would provide a demonstration project annually in public works and would require a mandated consultant for this purpose to be added to the budget for that particular project. He requested comment on this prospect. Ms. Parsons stated it is very important the consultants selected are conversant with the very latest proven technology. The technologies are changing drastically and improving rapidly, Ms. Parsons stated, and unless they are specialists in this field, ordinary engineers or consultants may not be sufficiently knowledgeable to perform the work. She voiced the opinion it would be well worth the money to obtain the services of an expert because the savings such a person would be implementing or suggesting will continue year after year. Observing the energy office is primarily a conduit for much of the federal funding, Senator Raggio inquired if there are any personnel within the energy office qualified to work with the State Public Works Board in this regard. Ms. Parsons replied no. She said the office staff does not include an engineer, but the agency does stay current with technological developments. The senator asked if the energy office advises the public works board on the technology. Ms. Parsons said the agency has been able to help the board in this regard. The energy office is a liaison with the national labs, she noted, and can obtain assistance and the latest information from that source. Explaining his reason for asking the question, Senator Raggio said the report from the interim committee on energy-related matters was quite critical of the public works board, indicating the board had failed to consider energy-saving measures. He suggested the energy office contact the board to apprise them of the current technology available in this area. Ms. Parsons replied the energy office has been informing the board of the very latest technological developments, and the atmosphere has been "much more open" than it once was. The energy office has also been able to supply the State Public Works Board with a grant to obtain equipment and training to assist in checking on energy use in buildings. Senator Raggio stated this matter would be further explored in other ways. Rose McKinney-James, Director, Department of Business and Industry, reminded the committee that during the budget presentation for the Division of Minerals she had indicated her desire to merge the energy office into the Division of Minerals. She said she continues to contemplate this as a possibility. Mrs. McKinney-James stated that at Senator Raggio's request she has been in contact with the mining industry and is exploring discussions with industry representatives that are aimed at being able to present to the committee the industry's position on such a merger. She pointed out the work performed by the energy office, primarily in the area of education and conservation and particularly with respect to indigenous resources, makes the agency an appropriate match with the minerals division. Senator Raggio asked if it is Mrs. McKinney-James' intention to speak with the mining industry, obtain consensus and then make a formal proposal. Mrs. McKinney-James replied affirmatively. The senator asked the budget office representative if the Budget Division endorses the proposal. Ms. Erickson said the budget office has not yet seen such a proposal, but would be willing to explore it. Rural Housing - page 941 Carolyn Stockton, Director, Nevada Rural Housing Authority (NRHA), Department of Business and Industry, provided an overview of the agency's mission and operations. She said the Nevada Rural Housing Authority's mission is to provide safe and decent housing for low income families and elderly persons in rural Nevada, and this is accomplished through the agency's ownership and management of 185 units of subsidized low income housing. The rural housing authority is also a contract administrator for the Section 8 Certificate and Voucher Program which defrays rental expense for 985 low income families in rural Nevada. Mrs. Stockton said the apartment complexes owned and managed by the NRHA are in rural Nevada. She further testified the rural housing authority has a commission comprised of five members who are appointed by the Governor. At least four commissioners must represent counties with populations under 1,000. Mrs. Stockton drew attention to the measurement indicators shown on page 941 of the Executive Budget for the Rental Assistance "Certification/Voucher" Program indicating 11,820 units were projected to be under lease in FY 1994 versus the actual number of 1,029 units under lease for FY 1994. The projection for the future years is the base allocation of 985 units, Mrs. Stockton stated. Senator Raggio inquired as to the source of the projection for 11,820 units. Mrs. Stockton replied the figure represents the number of units it would be possible for the agency to lease for the total year; they are "unit months." She called attention to the figure of 1,665 under Actual FY 1994, representing the number of people on the waiting list for rural housing and stated the number of families on the waiting list has since risen to over 2,400. There is a turnover of approximately 2.5 percent, which is 25 to 30 units per month, due to tenants moving and to increases in income level that exceed the limits for eligibility in the program. The housing projects managed by the NRHA, Mrs. Stockton continued, are always fully leased. Senator Raggio asked what the income limits are for eligibility to participate in the rural housing programs. Mrs. Stockton replied the limits are considered very low and are set by the federal Housing and Urban Development (HUD) agency. At the senator's request she provided further details on the income limits, stating they are set by HUD and vary from county to county in Nevada. The income levels vary according to how many persons are in a family (from one to four persons); for example, in Elko County the maximum income a family of three persons can have to qualify for participation in the rural housing program is $21,300. Senator Raggio inquired about the amount of the subsidy allowed to qualifying families. Mrs. Stockton said the amount paid by the family toward the rent is 30 percent of its income and the balance is paid by the NRHA. She pointed out that the actual for the Housing Management Program was for 176 units. The NHRA has recently begun construction on six units in the Lyon County Senior Citizen Project in Yerington, which will increase this number. Regarding the 1993-1994 Actual and 1994-1995 Work Program figures in the budget (page 942), Mrs. Stockton drew attention to the large differences between the two columns. She reported the rural housing authority transferred two major programs with outside banking accounts into the state accounting system. Senator Raggio stated for the committee's edification that staff has indicated the overall budget of the Nevada Rural Housing Authority was not formally included in the Executive Budget. The situation was explained as follows by the fiscal analysis staff: The actual 1994 activity was not recorded in the state's system. Prior to the approval of a work program by the Interim Finance Committee on September 13, 1994, a majority of the housing division's activity was not recorded in the state's accounting and budgetary system. This is why the actual 1994 amounts appear significantly lower than the 1995 work program amounts. Mrs. Stockton said the housing authority is still working with the Farmer's Home Project and the HUD New Construction Project. Senator Raggio ascertained that the Section 8 Certificate and Voucher Program accounts for the authority provided under the Housing Assistance Payments line item ($4.7 million) and affects the State Cost Allocation line item. He requested the Budget Division justify the state cost allocation in this budget. Ms. Erickson responded, stating she had approached all of the budget accounts for which she is responsible in the same manner with respect to the statewide cost allocation. Senator Raggio indicated the $24,640 recommendation for each year of the biennium "borders on the incredible" in that it has increased from zero to that amount. He repeated his request for justification on this item. He asked if there had not been a state cost allocation previously. Ms. Erickson replied she would research this. Mrs. Stockton said the agency has never had a cost allocation during the time she has been with the Rural Housing Authority, since 1984. Drawing attention to the line item Resources on page 942 of the base budget, Mrs. Stockton said the funds in this category are all federal funds. The $5.3 million is the Section 8 Certificate and Voucher budget for FY 1996 and FY 1997. At this time no changes in the funding are anticipated, Mrs. Stockton continued; however, the House Appropriations Committee in Congress recently voted to rescind the 1995 funding for new increments, and a vote by the full house is anticipated shortly. Senator Raggio inquired how passage of this legislation would impact the Rural Housing Authority. Mrs. Stockton stated it would not impact the current increments (units) that are under lease, but had new increments not been rescinded, the agency would have been able to apply for more units. Senator Raggio inquired as to the necessity for upgrading the four positions as recommended in decision unit E-805, Significant Reclassifications. Mrs. Stockton answered that when she assumed the position of director of this agency she set about reorganizing the staff and the departments within the housing authority, bringing two departments under the Rural Housing Manager, and an upgrade from grade 33 to 35 is requested for this position. Regarding the other proposed upgrades, Mrs. Stockton said one Management Assistant I position is recommended for upgrade to Program Assistant III because the person in that position is performing the same functions as those performed by the Program Assistant III for the Section 8 Certificate and Voucher Program. The basis of the recommendation to upgrade the Program Assistant II to Program Assistant III is that the person in this position serves as assistant to the director, a function performed by a Program Assistant III in other agencies. With respect to the recommendation to upgrade the Program Assistant IV to Housing Project Manager, Mrs. Stockton said the latter is actually a supervisory position. The authority currently has a supervisor for the projects and a supervisor for the Section 8 program, and the intention of this upgrade request is to make the two supervisory positions equal. Mrs. McKinney-James informed the committee there is a bill pending to remove the Rural Housing Authority from state government. She indicated support for the proposal, but said the department is still attempting to address issues with respect to the fiscal impact of such a move. She noted there is a fiscal note on the legislation, Assembly Bill 35. ASSEMBLY BILL 35: Reorganizes Nevada rural housing authority. Mrs. McKinney-James further stated the department is exploring some options which it has been asked to present to the Assembly Committee on Ways and Means. She offered to provide the information to the Senate Committee on Finance as well. Senator Raggio asked what the impact to the state would be in the event the Nevada Rural Housing Authority leaves state government. It was determined the impact would be loss of the cost allocation to the state as well as the cost allocation to the Director's Office. The senator suggested there should be cost reductions elsewhere since there would no longer be state costs associated with the performance of services by the agency. Mrs. McKinney-James said if the cost allocation had been structured other than it has been, such might be the case; however, the cost allocation for the Director's Office, which has no revenue stream, would be affected by the move. Senator Raggio remarked that the agency could not be expected to in effect pay a ransom to leave state government. Senator Jacobsen inquired if the housing authority has received any offers of military housing and said there is surplus military housing available in Indian Springs. Mrs. Stockton replied the Rural Housing Authority serves only the rural counties and therefore has no jurisdiction in either Washoe County or Clark County. The authority has a subsidy program in Pahrump, she said. Nevada Indian Commission - page 1009 Gerald W. Allen, Acting Director, Nevada Indian Commission, Department of Human Resources, presented the budget. It was noted the previous director has been deceased since 1992, at which time Mr. Allen was appointed acting director of the commission by the Governor. Senator Raggio asked Mr. Allen to tell the committee something about himself. Mr. Allen said he has worked with the Nevada Indian Commission for nearly 9 years. Before that he had worked with Indian tribes and has been working in Indian affairs since about 1969. He told the committee he is very familiar with the Indian issues and the Indian tribes, and the concerns that involve them. He worked primarily with the federal government prior to beginning to work with the state. Mr. Allen said that when he began working with the state he had to examine how the Indian tribes in Nevada are currently involved with the state; in doing this, and in his capacity as acting director, he has become more aware of issues that concern the tribes. Responding to questioning from Senator Raggio regarding the composition of the commission, Mr. Allen said there are five members on the Nevada Indian Commission, three of whom are Indian. The senator noted the term "Indian" is in the statutes, but indicated his willingness to use the term "Native American" instead of Indian (in general discussion) if it is considered correct form. He asked how frequently the commission meets and whether the members of the commission are active. Mr. Allen said the commission currently meets four times annually, on a quarterly basis, and the members are very active. Senator Raggio noted there had been indications in previous sessions of major disagreements among the various tribal councils and asked Mr. Allen to elaborate on this situation. Mr. Allen said two sessions ago a bill was proposed to revamp the Indian commission. There was a conflict between the tribal entities and other entities in the State of Nevada, such as the urban groups, and the Nevada Indian Commission got caught in the middle. Senator Raggio asked Mr. Allen if, as acting director of the Indian commission, he generally has a good rapport with Native Americans throughout the state. Mr. Allen replied affirmatively, stating he has a very good rapport with the [Native American] people and personally knows all of the [tribal] chairmen, with whom he has worked on various issues. Referring to the recommendation in decision module M-200, Demographics Caseload Changes in the maintenance budget (page 1010) to add funding for additional Indian commission meetings for a total of six meetings each year, Senator Raggio asked if the recommendation is realistic. Mr. Allen said the matter has been discussed at several meetings of the Indian commission, and one issue raised by commission members was their desire to become more actively involved with the affairs of the Native American tribes in Nevada. The commission members felt that to accomplish this it would be necessary to have more meetings of the commission. Senator Raggio said according to the information provided to the committee, the Indian commission has met only twice in FY 1995. Mr. Allen noted a commission meeting is scheduled for March 20. Senator Raggio said the committee may question the recommendation for six meetings. Senator Raggio invited Mr. Allen to discuss recommendations in the enhancement component of the budget. Mr. Allen called attention to the proposals in decision unit E-805 and E-806, Significant Reclassifications (page 1011) to eliminate the position of Education and Information Officer and adding the duties of that position to those of the Executive Director position. He said the request is to reactivate (reinstate) the position of Executive Director as well as to eliminate the other position. Senator Raggio inquired if any function capability is lost under this proposal and if the commission would be able to provide the level of service that was provided by the other position. Mr. Allen replied that at times it is somewhat difficult, but he has actually taken on the responsibilities of both positions since being appointed acting director and has been able to handle it. He informed the committee the commission may return to the Legislature in the next session to request another position. Commenting on the reported $800,000 shortfall in the budget for the state's wildlife division due to the provision of free licenses to various groups including seniors, disabled servicemen and Native Americans, Senator Jacobsen suggested it is time to stop treating any one segment of the population with favoritism and to work together instead. He asked Mr. Allen whether the Indian commission ever discusses such issues. Mr. Allen indicated this has occurred. He further indicated that while he could understand the senator's concerns, he was reluctant to speak for any of the Indian tribes on this matter. Handouts provided by Mr. Allen are attached hereto (Exhibit H). SENATE BILL (S.B.) 53: Exempts superintendent of public instruction from state personnel system. Senator Raggio referred to a letter received from Henry Etchemendy, Executive Director, Nevada Association of School Boards (NASB), requesting the committee not to schedule hearings on this bill. A copy of the letter is attached to these minutes as Exhibit I. SENATOR O'DONNELL MOVED TO INDEFINITELY POSTPONE S.B. 53. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR RHOADS WAS ABSENT FOR THE VOTE.) Senator Raggio told the committee the review of the Executive Budget by the Senate Committee on Finance is nearly completed. He asked the budget office representative when the prison budgets being revised by the Department of Administration can be expected. Janet Johnson, Deputy Budget Administrator, Budget Division, Department of Administration, provided a brief status report on the revisions. She said the information necessary to complete the revisions should be available soon. Senator Raggio suggested the budget office work with the judiciary committee, "which is also entertaining some proposals," to obtain a consensus so the Senate Committee on Finance and the Assembly Committee on Ways and Means are not required to be the arbitrators on these matters and an adjusted budget free of politics can be developed. The committee discussed plans for its upcoming tour of the Lovelock prison, scheduled for March 9. At Senator Jacobsen's suggestion a visit to the veterans' cemetery in Fernley was included in the itinerary. Senator Coffin said a deadline had passed 2 days prior which involved the planned delivery of software for the NOMADS (Nevada Operations Multi Automated Data Systems) project. He inquired if the committee had been informed of the status with respect to receipt of the software. Senator Raggio instructed the fiscal analysis staff to look into the matter and report their findings to the committee. The meeting was adjourned at 10:00 a.m. RESPECTFULLY SUBMITTED: Sue Parkhurst, Committee Secretary APPROVED BY: Senator William J. Raggio, Chairman DATE: Senate Committee on Finance March 3, 1995 Page